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Larger farmers to feel the squeeze as 2021-27 CAP budget scaled back

The EU’s new long-term budget plans for 2021-27 offer a clear signal that agricultural support in Europe is set for a decisive shift towards support of smaller family farms, and away from larger holdings.

A combination of a strong ideological commitment towards small and medium-sized holdings on the part of both Agriculture Commissioner Phil Hogan and Commission President Jean-Claude Juncker - and, more decisively, an urgent need to save money in the light of Brexit and other budget challenges - is pushing the Commission towards a reappraisal of the need to subsidise larger farms in the same way as at present.

It is possible that a rebalancing of one of the most notorious CAP statistics – that 80% of the money goes to support 20% of farmers – may yet be one of the lasting legacies of Brexit.

The CAP emerges as one of the main losers from the Commission’s proposals for the 2021-27 Multiannual Financial Framework, with spending at ‘current’ prices (i.e. the actual inflation-adjusted amounts) set to fall by almost 10% compared with the agreed ‘current’ price values for 2014-2020.

However, at a press conference to present the figures in Brussels on May 2, Hogan claimed the actual reduction was 5%, based on a like-for-like comparison for the EU-27 (i.e. with UK spending stripped out of the 2014-2020 figures).

He claimed that the overall budget ceilings for direct aid payments will not fall by more than 3.9% in any single member state, and added that although rural development budgets would fall by a greater margin, there would be added scope for member states to make up the difference via increased national contributions.

These figures are of course only proposals as yet – but given that governments in several member states have already condemned the increase in national contributions that the overall MFF plans will require, there is precious little chance of the CAP spending figures increasing in the final assessment. Indeed, they may even be cut further.

Direct payment cap

Significantly, Hogan took the opportunity to ‘officially’ leak the fact that, as already reported by IEG Policy, the Commission will impose a €60,000 cap on direct aid payments as part of the 2021-27 CAP. This in itself will not be a money-saving measure, as the cash saved will be recycled within each member state, either for topping-up aid payments to smaller farmers, or to create additional funds for Pillar Two spending.

But this proposal, in combination with the official re-designation of the Basic Payment Scheme as ‘Basic Income Support’, offers a clear signal to member states that if they want to make savings, they should do so primarily at the cost of larger farmers who are, or should be, better placed to cope with lower annual cheques from Brussels.

The Commission also committed to deliver on its promise to continue the process of external convergence, with direct aid payment envelopes in the Baltic States set to increase by 12-13% over the course of the MFF, and other member states including Romania, Slovakia and Portugal seeing no reduction. This too will contribute towards the Commission’s desired narrative of a more equitable agricultural support system EU-wide.

But a more controversial money-saving proposal mentioned by Hogan, in another apparent sneak-preview of the June 1 CAP reform unveiling, is the idea that EU co-financing rates for Pillar Two schemes should be reduced by 10 percentage points across the board.

This will be an unpopular suggestion and it may well get pushed back by member state governments when Council discussions get under way. But here, as with many other elements of the MFF, the Commission’s reply will be: ‘If you don’t want to save money here, then where should the axe fall instead?’

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